False claims regarding tax plan highlighted in media

Recent news reports highlight that not all taxpayers will benefit from the tax plan signed into law by Gov. McCrory last year. While disputed, this has been a major talking point for proponents of the tax plan – that all taxpayers will benefit from the income tax rate cuts. The General Assembly’s Fiscal Research Division discredited this claim[1] last month, however, noting that the tax plan creates winners and losers and that some taxpayers will pay more in income taxes.

News reports note that proponents are now backing away from this false claim. A fact check by the Associated Press (AP)[2] concludes that while the state’s income tax rate goes down for every taxpayer, this does not mean all taxpayers will actually pay less in overall state taxes. In response to AP’s findings, Gov. McCrory’s office responded that the governor did not say “every” or “all” taxpayer(s) would see more money in their paychecks as a result of the tax plan. State budget director Art Pope[2] points to a temporary one penny sales tax that expired two years ago to downplay the fact that some taxpayers – particularly low-income families with children – will pay more taxes under the tax plan. BTC’s analysis of the tax plan takes into account the expiration of the one penny sales tax as well as the decision by state policymakers to also let the surcharge on high-income taxpayers expire. Implications from the tax plan have been reported in other news outlets as well (see here[3], here[4] and here[5]).

A highly-regarded taxes and business strategy expert[6] at UNC-Chapel Hill’s Kenan-Flagler Business School cautions that the tax plan is unlikely to lead to an economic boom for North Carolina. The professor notes that North Carolinians did not get tax reform, but rather a tax cut that will largely benefit higher income taxpayers. BTC’s analysis of the tax plan[7] shows that taxpayers earning less than $84,000 a year will see their taxes increase, on average, while more than 65 percent of the net tax cut will flow to the top 1 percent of income earners in the state. The model used for our analysis is similar to those used by the congressional Joint Committee on Taxation, the U.S. Treasury Department, and the Congressional Budget Office.

The tax plan falls well short of true tax reform – little was done to rid the tax code of costly tax loopholes, the sales tax was not adequately updated to reflect a 21st century service-oriented economy, and the plan significantly reduces revenue for vital public investments.

We all want a better North Carolina. A tax plan that provides income tax cuts to the wealthy and profitable corporations at the expense of public schools, healthcare services for the elderly, and other important public investments does not represent a path toward shared prosperity for all North Carolinians.